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The Clinton Foundation

Report re: Corporate Review

I. Simpson Thacher has conducted a corporate review of the Foundation and its relationship
with its affiliates.

A. The Board and management believed that the 10th anniversary of the Foundation
was an opportune time to review the Foundations policies and operations.
Organizations move through life cycles, and it is common for an organization to
operate in a more informal manner in its early days. As the organization grows
and becomes more complex, it is common to review the organizations operations
to implement more robust governance and operating procedures.

B. The Simpson review started on October 27, 2011. Simpson conducted 38


interviews from November 1 through November 17. Simpson sought to interview
the senior leadership of the Foundation (staff directors and above) as well as
others who identified themselves as having thoughts to share to help shape best
practices. Interviewees were asked, among other things, to rate the effectiveness
and efficiency of the Foundations operations, the effectiveness of the process
determining operational priorities, and the effectiveness of the budget and
employee review processes; where they saw the Foundation in ten years; who
they saw as having substantial influence over the Foundation; potential conflicts
of interest; and what changes in operations or governance they might recommend.

C. After reviewing Foundation documents and policies as well as conducting these


interviews, Simpson shared its advice and guidance in several areas, including the
structure and operations of the Board and management, strategic planning, and
internal controls. Simpson also recommended areas for further review. President
Clinton, the Foundation Board, John Podesta, Victoria Bjorklund, and Jennifer
Reynoso met to discuss Simpsons preliminary recommendations on November
23.

D. Interviewees uniformly praised the effectiveness of the Foundation and its


affiliates, noting the enormous amount they have accomplished over a ten-year
period, including building the Presidential library in Little Rock, the number of
people receiving life-saving drugs through CHAI, the agreements negotiated by
the Alliance with the beverage companies, and the commitments made through
CGI.

E. Interviewees also shared with Simpson, and Simpson shared with the Board,
certain constructive criticisms. These included:

the need for the Foundation to develop the infrastructure necessary to


support a best-in-class organization;

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the need for greater Board and management oversight;

the need for more strategic and budgetary planning; and,

the need for clearer policy guidance and enforcement to manage potential
conflicts of interest.

F. Simpson made the following recommendations, among others:

1. Board.

a. Hold more frequent Board meetings, either in person or by


telephone.

b. Judiciously add more directors knowledgeable in the areas in


which the Foundation is active.

c. Consider establishing an audit committee to select, retain, evaluate,


and terminate the independent auditor; periodically review the
terms of the auditors engagement; oversee the auditors
engagement; review the annual audit report; review the adoption
and implementation of internal controls; review any whistleblower
complaints involving financial matters; and review any potential
conflict-of-interest transactions.

d. Consider appointing a Board Chair who would, among other


things, work with the CEO to plan and set the agenda for Board
meetings.

e. Involve the Board in strategic planning, including pre-approving


major new program initiatives and material changes to existing
programs. Have the Board periodically evaluate the effectiveness
of existing programs and initiatives.

2. Management

a. Consider hiring a Foundation President who would report to the


CEO and would be based in New York on a full-time basis. The
Foundation President should be responsible for coordinating
strategy across the Foundation and its affiliates.

b. Hold regular staff meetings as well as management training for all


managers.

c. Have management work with the Board on strategic and budgetary


planning.

3. Potential Conflicts of Interest.

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a. The Foundation has a Conflict-of-Interest Policy applicable to


directors, officers, and key employees and a separate policy for
other employees. Continue to publicize and conduct training to
familiarize employees with these policies and how they are
implemented.

b. The Foundation has a longstanding policy regarding outside


employment. In general, the Foundations Code of Conduct
provides that employees wishing to obtain employment outside of
the Foundation must first secure the approval of their immediate
supervisor, which may be granted or denied in the supervisors
sole discretion, after consultation with the Director of Human
Resources. Continue to publicize and conduct training to
familiarize employees with this policy and how it is implemented.

c. In general, hold regular training sessions regarding Foundation


policies. Set the tone at the top and encourage a culture where
policies are understood and compliance is the norm.

d. Ensure that staff is aware of reporting lines and that managers at all
levels are aware of their responsibility to enforce policies.
Establish clear pathways to obtain clarification when needed in
applying policies to specific situations.

e. Educate the Board and staff as to proper and timely disclosure of


conflicts of interest. Instruct officers and managers to educate staff
as to provisions of the employee conflicts policy and how to raise
conflicts with managers as conflicts arise.

f. Adopt a clear gift acceptance policy and procedures to ensure that


all donors are properly vetted.

g. Have all CGI comp Memberships vetted by CGI Management to


ensure that all such Membership offers advance the interests of
CGI.

4. Internal Controls

a. Have the Foundation President work with the CFO and the
Foundations auditor to review and discuss with the Audit
Committee internal controls. Have any recommended changes
presented to the full Board for approval.

b. Continue to educate staff as to Foundation expense policies and


expense reimbursement procedures.

c. Have CFO or designee review expense reports to ensure that they


comply with Foundation policies.

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